AMP Capital secures 40-year Melbourne student accommodation deal worth $217m

The firm is targeting more deals in the sector, to which it is aiming to commit 20%-25% of its Diversified Infrastructure Trust.

AMP Capital has entered into a 40-year student accommodation concession with the University of Melbourne through its Diversified Infrastructure Trust.

The deal is worth approximately A$300 million ($217 million; €191 million), Infrastructure Investor understands. AMP Capital declined to disclose or comment on the price or any other financial terms of the deal.

The contract covers 954 beds across two facilities in Melbourne: 303 Rourke Road, which is being refurbished, and Little House, which is under construction.

The residences will be the first in the city to use University of Melbourne branding. The university will retain operational responsibility, including marketing and pastoral care of students, while AMP Capital will be responsible for facilities management and maintenance. The fund manager has outsourced this to facilities services provider Spotless for the duration of the 40-year concession.

As part of the deal, AMP Capital’s Diversified Infrastructure Trust will be the preferred funding partner for any future student accommodation projects built by the University of Melbourne to support its growth.

Speaking to Infrastructure Investor, DIT portfolio manager Brad Williams said the deal complements and builds on the fund’s existing investments, which include the 650-bed Sydney University Village facility it has owned for more than 15 years.

“Purpose-built student accommodation is not quite at the scale we’d want in the fund yet, so we’re looking to invest another A$300 to A$400 million in the sector. That will increase our scale to around 20 to 25 percent of the fund,” he said.

The fact it was the first University of Melbourne-branded PBSA facility in the city made the asset attractive, he added, coupled with the concession length and the deal structure.

“We don’t invest in off-market freehold property PBSA facilities and we don’t act as the operator either. This is a concession-based partnership with the university, where it continues to operate the facilities and we’re funding and partnering with them, and relying on their brand,” he said.

Potential future acquisitions could include the Australian National University’s PBSA concession in Canberra. In 2016, AMP Capital was the underbidder for a 30-year concession for the rental revenue from nine PBSA facilities comprising approximately 3,760 beds, Infrastructure Investor understands, losing out to ASX-listed Infratil and Commonwealth Superannuation Corporation.

Infratil announced a strategic review of that investment earlier this month, which could result in a sale, with AMP Capital likely to be well-positioned to take advantage.

AMP Capital and Williams declined to comment on any specific future acquisition opportunities.

AMP Capital’s Diversified Infrastructure Trust is an open-ended fund with approximately A$1.425 billion of funds under management as at 30 June 2018. Assets held in the fund include Melbourne Airport, as well as several regulated utility assets and PPPs.

In AMP Capital’s 2018 H1 results, the DIT achieved an absolute one-year return of 16.6 percent and an absolute five-year return of 15.4 percent.